In this guide
Key takeaway: Liquidity stands as the paramount consideration for participants in prediction markets. When liquidity runs deep, traders benefit from compressed bid-ask spreads, rapid order execution, and market prices that accurately reflect underlying probabilities. Polymarket dominates the landscape with cumulative trading activity exceeding $1.5B; the vast majority of alternative venues operate at substantially lower transaction volumes.
Prediction market liquidity shapes every aspect of your trading performance — encompassing execution price, position exit velocity, and overall market efficiency. However, most newcomers prioritise market selection over liquidity assessment. This article clarifies why liquidity fundamentally outweighs other considerations.
What is liquidity?
Within financial trading environments, liquidity refers to the ease with which one can acquire or dispose of an asset whilst minimising price distortion. Prediction markets exhibit three distinct liquidity dimensions:
- Depth: The aggregate quantity of shares accessible across various price tiers within the order book
- Spread: The differential between the highest purchase offer (bid) and the lowest sale offer (ask)
- Volume: The total number of shares transacted throughout a specified timeframe
A market displaying 10,000 shares offered at 48 cents and 10,000 shares requested at 50 cents demonstrates robust liquidity. Conversely, a market with merely 50 shares on either side separated by a 10-cent gap exhibits poor liquidity characteristics.
Why liquidity matters for traders
Insufficient liquidity imposes tangible financial costs through multiple channels:
- Expanded spreads: Transaction costs rise substantially when entering and closing positions
- Slippage: Sizeable trades cause unfavourable price movements during execution
- Locked-in positions: Absence of willing counterparties may prevent exit prior to market settlement
- Distorted valuations: Sparse trading activity produces prices disconnected from genuine probability assessments
How to measure prediction market liquidity
Prior to executing any trade, examine these key metrics:
- Order book depth: PolyGram's depth visualisation tools allow traders to observe cumulative buy and sell pressure
- 24h volume: Elevated trading activity correlates with improved fill probability — critical for retail-sized positions
- Number of unique traders: Markets attracting 100+ distinct participants typically maintain sufficient liquidity for standard retail orders
- Spread percentage: Target markets where the bid-ask differential remains below 3 cents (3%) to optimise transaction economics
Which platforms have the most liquidity?
| Platform | Cumulative volume | Avg. spread |
| Polymarket | $1.5B+ | 1-3 cents |
| Kalshi | $500M+ | 2-5 cents |
| Betfair Exchange | N/A (sports-focused) | 1-2% on sports |
| Augur/Azuro | $50M+ | 5-15 cents |
How market makers create liquidity
Institutional liquidity providers simultaneously post matched buy and sell quotations, capturing the spread differential whilst supplying trading counterparties. Polymarket incentivises these participants through fee reductions and MATIC token allocations. PolyGram's proprietary liquidity infrastructure replicates Polymarket's order book architecture, guaranteeing PolyGram participants access equivalent depth as those trading directly on Polymarket.
Tips for trading illiquid markets
- Employ limit orders exclusively — refrain from market orders when trading thin markets
- Fragment substantial orders across multiple price points
- Exercise patience: establish your desired price and await execution rather than accepting unfavourable crossing costs
- Evaluate temporal dynamics — liquidity often improves substantially as markets approach resolution dates
Participate on the highest-liquidity prediction market venue. Start trading on PolyGram →